In this paper, we investigate the information content of the share repurchase program. We find that the announcing firms¡¦ stockholders earned positively significant abnormal returns around the announcements. The results show that such share buyback announcements signal positive information about the value of the firms, which suggest that the announcing firms were undervalued previously. Consistent with the signal hypothesis, we also find that share buyback announcements are followed by an increase in the operating performance. These empirical results support the signal hypothesis implies that the stock buyback programs have information content about the future improving profitability of the firms.

<p>The Swedish business cycle is in a strong position at the moment, leading to great results and larger profits. This strong business posture has encouraged companies to increase both their liquidity and revenue. Now there is a dilemma, what actions should or could a respectable business take on these newfound liquid assets.</p><p>The purpose of this paper is to deliver a clear picture of what options there are for such companies listed on the Swedish stock-market, and how the market wants them to act. To these means we have studied the basic theories linked to this subject and reviewed the cause and effects that motivates them. We have also conducted interviews with the people representing the market through their line of business.</p><p>In the theory we found several options on what companies in similar situations tend to do. They can either hand out share dividends to stock owners, repurchase own company stocks, acquire financial assets or make acquisitions of companies. Through interviews with the people within the financial market, we have been able to establish the empirical facts necessary to analyse the theory we’ve brought forward and draw the following conclusions. The alternatives available and that the market agrees to can be ranked with company acquisitions as first, secondly share dividends and lastly repurchase of own company stock. However the market do not want a company to acquire financial assets, as long as it isn’t their core business.</p>

The Swedish business cycle is in a strong position at the moment, leading to great results and larger profits. This strong business posture has encouraged companies to increase both their liquidity and revenue. Now there is a dilemma, what actions should or could a respectable business take on these newfound liquid assets. The purpose of this paper is to deliver a clear picture of what options there are for such companies listed on the Swedish stock-market, and how the market wants them to act. To these means we have studied the basic theories linked to this subject and reviewed the cause and effects that motivates them. We have also conducted interviews with the people representing the market through their line of business. In the theory we found several options on what companies in similar situations tend to do. They can either hand out share dividends to stock owners, repurchase own company stocks, acquire financial assets or make acquisitions of companies. Through interviews with the people within the financial market, we have been able to establish the empirical facts necessary to analyse the theory we’ve brought forward and draw the following conclusions. The alternatives available and that the market agrees to can be ranked with company acquisitions as first, secondly share dividends and lastly repurchase of own company stock. However the market do not want a company to acquire financial assets, as long as it isn’t their core business.

This thesis investigates open market repurchase announcements by Toronto Stock Exchange (TSX) listed firms. First, I develop a comprehensive database of normal course issuer bids (NCIB) and report descriptive data on repurchasing activity between 1994 and 2005. I find that repurchase programs peak in 2000 and then decline. I also find evidence that repurchase programs are concentrated in certain industries. Next, using Compustat data, I investigate the characteristics of firms announcing repurchase programs. I find evidence that firms who announce repurchase programs are large in size and have high operating cash flows, low leverage, low share turnover and low dividend yields. I extend the repurchases literature by demonstrating that firms with low trading volume are more likely to initiate repurchase programs, consistent with an attempt to improve sell side liquidity. Finally, I investigate the market reaction to NCIB announcements. The results indicate that TSX firms experienced a significant market reaction to repurchase announcements between 1994 and 2005 as measured by both return and volume tests. I extend the repurchases literature by showing that announcement returns are higher for firms who followed through on their previous repurchase announcements. Little evidence exists of investor response to the disclosed reasons for repurchase programs.

This thesis investigates open market repurchase announcements by Toronto Stock Exchange (TSX) listed firms. First, I develop a comprehensive database of normal course issuer bids (NCIB) and report descriptive data on repurchasing activity between 1994 and 2005. I find that repurchase programs peak in 2000 and then decline. I also find evidence that repurchase programs are concentrated in certain industries. Next, using Compustat data, I investigate the characteristics of firms announcing repurchase programs. I find evidence that firms who announce repurchase programs are large in size and have high operating cash flows, low leverage, low share turnover and low dividend yields. I extend the repurchases literature by demonstrating that firms with low trading volume are more likely to initiate repurchase programs, consistent with an attempt to improve sell side liquidity. Finally, I investigate the market reaction to NCIB announcements. The results indicate that TSX firms experienced a significant market reaction to repurchase announcements between 1994 and 2005 as measured by both return and volume tests. I extend the repurchases literature by showing that announcement returns are higher for firms who followed through on their previous repurchase announcements. Little evidence exists of investor response to the disclosed reasons for repurchase programs.

Firms that announce open-market share repurchase programs are not obligated to follow through in the actual acquisition of shares. In fact, we find that the majority of firms fail to acquire the target number of shares specified at announcement and many firms fail to repurchase any shares at all. Therefore, the announcement of a share repurchase program has a degree of uncertainty regarding the announcing firms credibility. This study examines the possibility that market participants evaluate the credibility of a firms share repurchase announcement based on the firms previous share repurchase history. We examine 1,507 share repurchase programs for firms listed on the Toronto Stock Exchange (TSX) from 1995 to 2005 and find that firms that have completed a higher proportion of previous share repurchase programs experience larger abnormal returns on the announcement of subsequent repurchase programs. Therefore, we conclude that the market reacts more favorably to the share repurchase announcements of credible firms compared to firms that lack credibility.

Firms that announce open-market share repurchase programs are not obligated to follow through in the actual acquisition of shares. In fact, we find that the majority of firms fail to acquire the target number of shares specified at announcement and many firms fail to repurchase any shares at all. Therefore, the announcement of a share repurchase program has a degree of uncertainty regarding the announcing firms credibility. This study examines the possibility that market participants evaluate the credibility of a firms share repurchase announcement based on the firms previous share repurchase history. We examine 1,507 share repurchase programs for firms listed on the Toronto Stock Exchange (TSX) from 1995 to 2005 and find that firms that have completed a higher proportion of previous share repurchase programs experience larger abnormal returns on the announcement of subsequent repurchase programs. Therefore, we conclude that the market reacts more favorably to the share repurchase announcements of credible firms compared to firms that lack credibility.

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The objective of my two essays together is to examine whether the trades made by the insiders prior to open market repurchase (OMR) announcements contain information that can be used to identify the repurchases that are motivated by undervaluation. The existing literature on shares repurchases suggests that while undervaluation has been a dominant motive behind repurchases for past few decades, identifying these undervalued firms still remains a challenge. The book-to-market ratio is commonly used as a proxy for mispricing; however, its ability to identify undervalued repurchasing firms has recently come into doubt (Chan et al., 2004). Instead, I propose using proxies based on insider trading to identify the undervalued repurchasing firms.In the first essay, I document a relation between insider trading and both the short- and long-run stock returns of open market repurchasing firms. My findings suggest that the personal trades made by insiders prior to the OMR announcements contain information that can be used to identify undervalued repurchasing firms. I use various measures of insider trading and show that firms with high (low) insider buying (selling) prior to repurchase announcements earn abnormal stock returns in both the short- and long-run. I also find a positive (negative) relation between insider buying (selling) and the actual repurchasing activity of the firms.In my second essay, I further test whether the trades made by insiders prior to OMR announcements contain information that can be used to identify the repurchases that are motivated by undervaluation by examining the post-announcement operating performance. I find a relation between insider trading and the post-announcement operating performance for the OMR firms that is consistent with the hypothesis that insiders' trades prior to OMR announcements are informative. Specifically, I find that firms with high insider buying prior to the OMR announcements outperform their corresponding control firms, whereas, firms with low insider buying do not. In addition, I test for a relation between insider trading and (a) the accruals management around OMR announcements, and (b) the market reaction to the earnings announcements made by the OMR firms. I find a weak evidence of insiders timing their trades along with accruals management. However, the market reaction to earnings announcements made by the OMR firms does not seem to vary with level of insider trading. Overall, the evidence is consistent with insiders of repurchasing firms knowing when their stocks are undervalued and they timing both their personal and firm level trades accordingly.

¡@¡@Treasury stock system allows listed companies to buy back their own shares in the open market. In general, when the company announced stock repurchase event, investors are optimistic about the prospects of the company. Therefore, the company's stock price usually rises. But will investors buy more stocks, leading to increased liquidity of stocks? This study combines with stock repurchase and liquidity to investigate the impact of stock repurchase on liquidity. Further events will be studied by different factors stratified, including firm size, stock price, industry, the purpose of stock repurchase, the proportion of execution, the holding ratio of insiders and institutional investors. By using three types of liquidity measures, the study is to observe the changes of liquidity of stocks in the different situations. ¡@¡@After conducting mean difference in pair-sample test, the empirical results indicate that the sample stocks in the stock repurchase announcement, the outcome supports liquidity increase hypothesis. In terms of the stratification factors, the smaller of the company size or lower stock price will help increase the liquidity of the stock in the market. Non-electronics sector, aims to buy back equity write-off shares can improve market liquidity. Higher or lower percentage of insider ownership shares in¡@companies will lead to the increase of stock liquidity. Higher holding shares proportion of institutional investor in companies will increase liquidity. The amount of execution ratio is of no factors, but the liquidity of the stock repurchase still supports the liquidity increase hypothesis.